KDI and US Brookings Institution "Technological Progress Deepens Income Inequality... Concerns Over 'Luddite Movement' Revival"

[Sejong=Asia Economy Reporter Son Seon-hee] Amid the acceleration of non-face-to-face technological progress following the COVID-19 pandemic, concerns have been raised that a backlash against technology similar to the 'Luddite movement' could reoccur due to the slowdown in productivity growth and worsening income inequality. The Luddite movement was a machine-breaking movement that took place in the textile industrial regions of central and northern England in the early 1800s.

On the 20th, the Korea Development Institute (KDI), in collaboration with the Brookings Institution in the United States, analyzed the impact of technological progress on productivity, finance, labor markets, and inequality through the report titled 'Paradigm Shift: Growth, Finance, Jobs, and Inequality in the Digital Economy.'

The joint research team stated, "In the goods market, technological progress has caused an expansion of productivity gaps between companies and hindered technology diffusion through economic power concentration and reduced competition," citing 'failure of competition policy' as the underlying cause. In particular, they pointed out that "the failure to adapt competition policy in the data and digital economy sectors has led to reduced competition in those sectors."

Regarding the labor market, they noted, "Automation and digital innovation have replaced demand for repetitive tasks, intensifying labor income inequality, and wage increases have been sluggish compared to productivity, worsening the labor income share." They suggested, "To democratize technological innovation, it is necessary to strengthen existing redistribution policies and consider predistribution policies." Here, 'democratization of technological innovation' refers to enabling technological innovation to lead to productivity and distribution improvements and wage increases across a broader spectrum.

The report also proposed competition policies for the digital era, including ▲strict enforcement of antitrust laws ▲regulation of private data usage ▲antitrust platform supervision ▲monopoly reviews of mega IT companies ▲and the establishment of new supervisory bodies for digital market regulation.

Additionally, it emphasized the need to reduce the digital divide and expand education and training opportunities for low-income high-skilled workers. In the labor market, it advocated for a policy shift from 'employment protection' to 'job transition support' and mentioned the necessity to improve job mobility.

This report is the second outcome of a joint research project conducted over four years since 2018 under the theme of 'New Growth Agenda.' The KDI stated, "We plan to actively pursue convergent research and collaboration by discovering new agendas in the future."

This content was produced with the assistance of AI translation services.